A Review of Recent Research on Labor Supply Elasticities: Working Paper 2012-12

Robert McClelland and Shannon Mok

No 43675, Working Papers from Congressional Budget Office

Abstract: This paper updates a review conducted by CBO in 1996 in which the agency evaluated the academic research on the effects of changes in after-tax wages on labor supply in the U.S. economy. That review concluded that substitution elasticities were larger in absolute value than income elasticities and that the decision to work was more responsive to after-tax wages than was the choice of hours. In this update, we find that for men and single women, estimates of substitution elasticities have increased, and income elasticities still appear to be smaller in absolute value than

Date: 2012-10-25
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